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PG&E Proposes New & Improved Rates for Electric Car Customers

Max Baumhefner

Posted May 9, 2012 in Curbing Pollution, Living Sustainably, Moving Beyond Oil, Solving Global Warming

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Today, the biggest electric utility in California, the largest car market in the country, took an important step to give drivers access to a cleaner fuel that’s roughly the equivalent of buck-a-gallon gasoline.  Pacific Gas & Electric (“PG&E”) has submitted a proposal for new and improved rate plans that encourage electric car drivers to charge when there’s plenty of spare capacity on the electrical grid, at a price that, in real dollars, is less than half what gas cost in 1949.[1]

To be clear, PG&E already has rates designed for electric cars, but those rates are unnecessarily complex and in need of an update, which is why the California Public Utilities Commission directed PG&E to develop new, simpler options for electric vehicle drivers.  Today’s proposal is actually the second attempt by PG&E to comply with that directive.  The first one spurred 75 letters of protest from some vocal electric car customers who objected to some of the proposed changes. The plan PG&E submitted today addresses the concerns raised in those protest letters and should significantly improve the fundamental economics of vehicle electrification in a large portion of the Golden State.

Both the original PG&E proposal and the one submitted today offer the lowest prices during nighttime hours to encourage drivers to charge when there’s plenty of spare capacity in the electrical grid.  But the new proposal is more attractive across the board, and and has more hours during the weekend when drivers can take advantage of the lowest price.  More good news for electric cars in California, whereas the original proposal would have imposed an $8.00 monthly customer charge, the new proposal has no customer charge.  Likewise, whereas the original proposal would have simply replaced the existing electric car rates, the new proposal would allow those customers who like their current rate plan to keep it until 2015.

The Public Utilities Commission still has to review the proposal, and even if it’s approved, it’s not likely to be fully implemented until the Fall, but today’s announcement is fundamentally a good news story for Californians who are sick of paying high and volatile prices at the pump.

Kudos should be given to the 75 electric car drivers who sent in letters to the Public Utilities Commission suggesting improvements to the original PG&E proposal.  They represent a significant chunk of the total number of electric vehicle customers in PG&E territory.  Utility regulatory filings do not generally garner that degree of public participation, which is a testament to the increased energy awareness that occurs when people start to drive on electricity.

Not many people know what a “kilowatt-hour” is, what one costs, or what it can do for them, but everyone knows the price of a gallon of gas and most people know how far they can drive on one.  The electricity world could use some of that awareness and electric cars can help bridge the gap.  Sixty-seven percent of participants in a yearlong study conducted by the University of California at Davis reported that driving an electric version of the Mini Cooper changed the way they think about energy.[2]  As my colleague, David Goldstein, explains, there are literally trillions of dollars in savings to be had from investments in energy efficiency.  If we paid as much attention to that number as we do to the price of a gallon of gas, our economy and our environment would both stand to benefit.

 


[1] Driving a modern electric car on PG&E’s proposed off-peak rate of just under 10 cents/kWh is equivalent to driving a 30 mile-per-gallon conventional vehicle on $1.00/gallon gasoline. The price of gasoline in 1949 was $0.268/gallon, or $2.42/gallon in 2010 dollars.  Source data: Energy Information Agency.

[2] UC Davis Institute of Transportation Studies Research Report: UCD-ITS-RR-11-05, p. 71.

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Comments

BSMay 9 2012 11:03 PM

$0.10/kWh for OFF PEAK electricity? Holy cow. I pay about $0.04/kWh for off-peak electricity right now ($0.023 plus fuel charge). I can think of another way for CA to encourage electric cars: get rid of insanely high electricity prices!

Matt HaberMay 15 2012 10:14 AM

Max--

It would have been good if you'd done a little more digging before jumping on PG&E's PR bandwagon.

As you said, there's nothing new (or wonderful) about PG&E's new proposal. It would replace the existing E9* rates for electric vehicle owners. That rate already rewards off-peak use. The BIG difference is that PG&E's proposed rate (just like it's last proposal that the EV community hated) gets rid of the tiered rate structure. Maybe that's complicated to you, but to me it's a big conservation incentive. It's also the way their basic residential rates work.

For those of us who have invested in conservation technology (and smart use) to stay in the low tiers (prior to my Leaf purchase, my household was almost never out of the baseline tier), the new rate proposals are a step backwards. If they go into effect, I, and I expect others who have been in the low tiers in the past will switch back to basic residential rate. I won't have much incentive any longer to push my electricity use off of peak hour use; rather, I'll just use appliances at my convenience.

*PG&E was ordered by the PUC to move to a non-tiered rate for E9-B, the rate structure for EVs with a separate meter. That makes some sense. I suspect that this is the first of PG&E's moves to get rid of the conservation tiered rate structure for all residential users.

Max BaumhefnerMay 15 2012 01:10 PM

Hi Matt, We support tiered rates. As you point out, they convey the simple message that the more you use, the more you pay. You're also dead-on that the existing E9 rates are both tiered and time-of-use, providing an incentive to charge off-peak and an incentive to use less. However, for most folks, varying rates by both time of day, season, and by marginal consumption, is simply too complex. Two tiers, times three time-of-use periods = six different prices during the course of the month. Behavioral economists point out that folks need to understand price signals if they are to influence behavior. I applaud your investments in efficiency that keep you in the lower tiers. Unfortunately, not many folks are as energy aware as you are and will require rates that are easier to understand. The existing E9 rates were experimental rates that haven't been modified in about a decade, with the result that the lower-tier off-peak prices do not cover the cost-of-service. In other words, it's not sustainable to provide them to tens of thousands of EV drivers as doing so would result in a subsidy from other customers. Under the new proposal, folks like yourself are grandfathered until 2015, but in the end, the rates need to be updated. The new proposal represents a significant improvement over PG&E's previous proposal (no customer charge, lower prices during all periods, and more off-peak hours on weekends). I'll note that we are working on some lower cost metering solutions to enable folks to move only their cars onto EV rates (which would help you - as you'd be rewarded for keeping your home consumption in the lower tiers of the standard residential rate, but also provide you the opportunity to charge on off-peak prices). Thanks for the comments, Max

jason jungreisMay 15 2012 04:53 PM

Max,

Not much to argue here: you're wrong on this one. 1. The existing model works; 2. There is no behavioral study indicating that the existing model is too complex; 3. You agree with every point but the conclusion. The existing model should stay, plain and simple. You are doing a huge disservice to put NRDC behind a PG&E proposal that misinforms, misdirects, and misapplies basic information. I will definitely be keeping this in mind when time to renew my NRDC membership rolls around.

Max BaumhefnerMay 15 2012 05:17 PM

Hi Jason. I'm afraid keeping the existing model in perpetuity isn't really an option. The Public Utilities Commission won't allow it. Because the lower tier price in the E-9 rate hasn't been increased in over a decade, it's below the cost-of-service, which means other customers (non-EV) customers are subsidizing EV drivers. The Public Utilities Commission won't let that continue, but under PG&E's revised proposal, it'll be phased out. The revised PG&E proposal is significantly better than their original replacement proposal, and is significantly more attractive than the comparable rates of Southern California Edison. Many customers will actually be better off on the new proposed rates than they are on E-9 (because they go into the second tier). As I mentioned to Matt, we are also working on lower-cost metering solutions and other options, which may better meet the needs of customers such as yourself. Hope that helps.

Jack Lucero FleckMay 17 2012 08:14 PM

Max--One important issue is the minimum charge and meter charge. The current E9 rates charge $11 per month in meter fees and minimum fees. The new proposal has higher hourly rates than the current E9 rates, but the new rate appears to drop the meter fee leaving a $4.43 minimum charge per month for E9A and $1.50 per month for E9B. This would mean that the new rates come out fairly close to the old rates.

However, for those of us with solar panels (about 1/3 or more of EV owners), I'm wondering if this will trigger an additional fee to be added onto the E9A rate.

Can you find out?


Max BaumhefnerMay 17 2012 08:36 PM

Good question. Note: The new proposal doesn't replace or modify the "E9" rates, it lets those continue until 2015, but it adds two new "EV" rates (one separately metered and one whole-home). The proposed whole-home EV rate has no customer charge (whereas the original PG&E proposal had an $8/month charge). It does have a minimum bill amount of $4.43, but that only comes into play if you don't use enough electricity to generate a bill greater than that amount (a feature on all of PG&E's residential rates, meant to recover some fixed costs that don't vary with consumption). The proposed separately-metered rate has no minimum bill amount and no customer charge (whereas the original PG&E proposal had an $8/month charge), though it does have a $1.50/month meter charge (per the PUC policy that customers requiring a second meter should bear those costs). You're right that those customer charges can add up and it's good news that the new proposal has no customer charges.

Jack Lucero FleckMay 18 2012 01:35 AM

Thanks for the response. I take it that your understanding is that there will be no extra charge for my solar panels, even though the meter requires someone to read it every month (i.e. it's not a smart meter since the solar meters run backwards and the "smart" meters aren't smart enough to do that.)

I would be more confident in your answer if your information regarding minimum charges were correct. However, I pay a minimum charge of $11 every month both summer and winter whether I generate a negative bill (summer) or a positve bill greater than $11 (winter). I had hoped that the minimum charge would only apply in the summer, but that's not the way it works.

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